Why Is ProAssurance (PRA) Down 16.2% Since Its Last Earnings Report?

Ross Stores (ROST) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

A month has gone by since the last earnings report for ProAssurance Corporation PRA. Shares have lost about 16.2% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is PRA due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

ProAssurance (PRA) Q1 Earnings Miss Estimates, Down Y/Y

ProAssurance's first-quarter 2018 operating earnings per share of 40 cents missed the Zacks Consensus Estimate by 6.9%. Also, the bottom line declined 35.5% year over year.

ProAssurance’s quarterly operating revenues grew 1.9% to $211.9 million from the prior-year quarter on the back of higher premiums as well as other income. However, the top line lagged the Zacks Consensus Estimate by 2.8%.

Quarterly Operational Update

Gross premiums written grew 5% year over year to $243 million, primarily driven by higher premiums in Specialty P&C Insurance and Workers' Compensation segments. Also, net premiums earned rose 2.3% year over year.

Net investment income declined nearly 5% year over year to $22 million.

Total expenses increased 5.4% year over year to $192.6 million. This rise in costs mainly stemmed from higher net loss and loss adjustment expenses as well as underwriting, policy acquisition and operating expenses.

Quarterly Segment Results

Specialty P&C Insurance Segment

Total revenues of $117.5 million rose 2.9% year over year.

Gross premiums written were $140.5 million, up 2.7% from the year-ago quarter.

Total expenses of $112.8 million increased 11.8% year over year.

Workers' Compensation Segment

Total revenues of $58.8 million rose 6% year over year on the back of higher net premiums earned.

Gross premiums written were $91.3 million, up 8.5% over the prior-year period.

Total expenses of $55.9 million, increased 6.5% year over year.

Lloyd's Syndicate Segment

Total revenues of $13.5 million declined 12% year over year.

Gross premiums written were $12.4 million, down 2.8% from the year-earlier quarter.

Total expenses of $15.7 million inched up 0.1% year over year.

Corporate Segment

Total revenues of $11.4 million plunged 70% year over year.

Operating expenses of $4.7 million decreased 43.7% over the year-ago quarter. Interest expense of $3.7 million declined 10.4% year over year.

Financial Position

As of Mar 31, 2018, ProAssurance’s total investments were $3.5 billion, down 5.1% from the number registered at year-end 2017.

As of Mar 31, 2018, the company’s total assets were $4.7 billion, down 5.1% from the level at year-end 2017.

As of Mar 31, 2018, the insurer’s shareholder equity was $1.6 billion, down 1.6% from Dec 31, 2017.

Share Repurchase & Dividend Update

The company did not buy back any shares in the reported quarter. As of Apr 30, 2018, it had approximately $110 million of shares available under its board-authorized stock repurchase program. In March 2018, the company’s board approved a regular dividend of 31 cents, paid in April.

Notably, within a span of almost 11 years, the company has been able to return more than $2 billion to its shareholders through regular and special dividends.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

ProAssurance Corporation Price and Consensus

At this time, PRA has an average Growth Score of C. Its Momentum is doing a bit better with a B. The stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise PRA has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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